Personal Finance

One of the nation’s largest 529 college savings plans slashes fees. Others may follow

Key Points
  • Total investments in 529 plans reached a record last year, according to the College Savings Plans Network.
  • There are many tax benefits to these education savings tools, but there may also be investment and administrative fees, as well.
  • One of the nation’s largest plans is bringing those costs down.
How to use a 529 plan to save for college
How to use a 529 plan to save for college

Throughout the pandemic, 529 college savings plans have only gained momentum — even as higher-education enrollment numbers sank.

In 2021, the average account size jumped to a record of $30,287, according to the College Savings Plans Network, or CSPN.

Total investments in 529s also reached a record $464.3 billion last year, up nearly 10% from 2020.

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There's a reason these accounts have proved popular in an uncertain time: Not only can you get a tax deduction or credit for contributions; earnings grow on a tax-advantaged basis and, when you withdraw the money, it is tax-free if the funds are used for qualified education expenses such as tuition, fees, books and room and board.

Currently, 34 states and the District of Columbia offer a write-off for 529 contributions as a state income tax deduction or credit, according to Morningstar

However, it's also important to assess each 529 plan's fees, which may include account maintenance, asset management or other miscellaneous expenses, according to Rachel Biar, the chair of CSPN. "Sometimes you have to balance the fees of the plan with the tax benefits." 

How families can use 529 plans to help save for college
How families can use 529 plans to help save for college

Virginia's Invest529, one of the largest 529 plans in the country, recently announced it was cutting administrative fees by almost half, effective Jan. 1.

The plan, which oversees more than 3 million accounts, also experienced record education savings numbers last year.

As the accounts grew in size, it became easier to bring the costs down, according to Virginia529's CEO Mary Morris.

At the same time, "this reduction reflects our continuous efforts to maintain one of the lowest 529 fee structures in the country and to offer the best chance for our families to meet their savings goals," she said. 

"It's certainly a trend we've seen across the country," she added, of lowering fees.

To be sure, average fees have fallen substantially in 529 plans since the creation of the investment program back in 1996, according to

Now, total investment and administration fees generally range from zero to 2%, depending on how the accounts are managed. ( also has a comparison tool and fee study, which compares the 10-year total costs of all so-called direct-sold 529 plans.)

Although Virginia's Invest529 already had very low fees, the reduction should save account holders about $3 million altogether, according to Morris.

"Every little bit helps," she said.

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